February 2009

For those who have been patiently waiting for a day of climactic selling to end the bear market, yesterday surely was not it. It was instead more of the same death-by-a-thousand-cuts bloodletting that has halved the Dow Industrial Average since the 30-stock index recorded an all-time high at 14198 in October of 2007. At Monday’s close the blue chip average stood at 7115, down 3.4 percent on the day and 18.9 percent so far this year. Don’t give up hope, though. A respite from the selling could conceivably come soon, since the Indoos are just 232 points from a Hidden Pivot at 6883 that has served as our minimum downside target since January 12, when a bearish “trigger pivot” at 8537 was hit. We would caution investors against dropping their guard, though, since even if the Dow’s expected bounce from 6883 is powerful, it could still turn out to be nothing more than a bull trap. There is another possibility as well – that the blue chip average will fall to 6883 and keep on going for another 10 to 20 points. That would be an extremely negative sign, since Hidden Pivots as clear and compelling as the one at 6883 almost invariably evince a tradable bounce, however feeble. If one is not forthcoming we would infer that there is still plenty of selling power remaining to push stocks still lower. How much lower? Better sit down for this one, because the next major target beneath 6883 lies at…4670! That would equate to a 67 percent drop from the highs, making it the worst bear market since the Dow shed 90 percent of its value following the 1929 Crash. Help from Arithmetic Some investors might be heartened to learn that simple arithmetic argues against a sudden and devastating collapse of

The short-squeeze that erupted with such violence on Friday has gotten second wind following a choppy consolidation. As of 9:20 p.m. Sunday night the futures had reached 1.2945, but a Hidden Pivot target at 1.2980 suggests that at least a little more upside lies ahead over the near term. If that resistance too is impaled, we should infer that the futures are bound still higher, to at least 1.3060. _______ UPDATE: The futures are retreating sharply, down 250 ticks, after peaking overnight at 1.2989, a hair above our target.

It's been quite a while since we looked in on this stock, but since I mentioned a 2.67 target in the chat room, here's a chart that shows why the target is probably unavoidable. We might infer that the selling would be a bit overdone at that point, but for GE there is no escaping still-huge exposure to consumer-credit risks that may eventually dwarf the value of global sales of products ranging from light bulbs to jet engines, to turbine generators, to appliances.

After hammering away at a 301.65 midpoint resistance for nearly a month, the Gold Bugs Index has left it in the dust, presumably bound for at least 361.53. That would represent a rally of 12 percent from these levels, which if equaled by Gold futures would imply $1120 an ounce.

The loony short-squeeze off Friday's lows looked likely to produce a second leg up Sunday night/Monday. If so, we can use a Hidden Pivot at 789.25 for a minimum target, assuming it is confirmed by a move through the target's sibling midpoint, 776.25. That's 2.50 points beneath Friday's day-session high, so night owls could use a print at that price as a "hidden breakout" for purposes of getting long. _______ UPDATE: The loony short squeeze made it to within less than three points of our target before relapsing (so far) by nearly 50 points. Remember, any rally that doesn't exceed at least two prior peaks on the hourly chart is a phony -- the kind of suck-in rally that at this point could fool only CNBC's benighted minions.

The chart shows the origins of the 1025.20 target identified in today's commentary, and you don't need to be a Pivoteeer to appreciate how natural and compelling it is. For the moment, the futures have sold off $30 after peaking close to the 1006.10 pivot where I'd warned of a possible stall, but I doubt the resistance will put up much of a fight.

We’ve been monitoring gold’s vital signs closely, since any foray above $1000 is cause for nervousness. The yellow stuff has always been free to roam, and even to misbehave, below that threshold; but once above $1000, the bankers regard each rally with a glower of malice.  While it is clear that debt deflation’s overwhelming power has rendered the central banks impotent in their efforts to arrest the collapse of the global economy, the bankers still retain the ability to crush any hint of rebellion by gold bulls who would deign to challenge the monetary order. With their relatively large stocks of physical gold, and the complicity of institutional agents such as JP Morgan to help suppress “paper gold” in futures markets, the bankers and the IMF have enough influence over bullion’s price to temporarily suspend the laws of supply and demand.   The politicians are on board, of course, although not as conspirators. They are all knee-jerk Keynesians at the moment, either too stupid and/or lacking in imagination to understand why fiscal spending, no matter how much of it, cannot possibly extricate the economy from a deflationary black hole. They have put their trust in eggheads and MBAs to fix things, even if most of us have begun to suspect that throwing yet more trillions of dollars into the maw of deflation will not solve anything. And although our elected leaders might not feel so strongly about gold as Keynes, who was appalled by the popular appeal of “that barbarous relic,” they are nonetheless dumbfounded as to why anyone would prefer gold-backed currency to the Monopoly money that The Government has empowered as legal tender.   Concerning our immediate outlook for gold, we have identified 1025.20 as the next significant point of resistance for the Comex April contract. The number is yet

Rick’s Picks is now available on Twitter. Follow Rick Ackerman to receive instant notifications when Rick’s commentaries are posted. Comments *** A few months ago we considered telling readers to skip a mortgage payment or two, just in case the government decided to bail out hardship cases. We scrapped the idea, though, out of concern that some of you might take us seriously and risk jeopardizing your credit scores. In retrospect, we can now confess that we were serious – or at least half-serious, since it seemed likely at the time that homeowners who had gotten in way over their heads would be the first to receive special treatment after the government figured out that “rescuing” multinational banks would do nothing to staunch the tide of foreclosures. Read The Rest of The Article | Comments *** My wife does most of the grocery shopping, but on my last few visits to Whole Foods and Safeway, I was dismayed to find that some of the things she had sent me to buy were unavailable. The shelves where I might have expected to find these items, including fruit juices, canned soup and crock mustard, were bare. I assumed that there had been a run on them, perhaps because they had been heavily discounted. However, now comes word on the evening news that some major purveyors, including Kraft and Sarah Lee, are cutting back on selection by focusing on the brands that sell best. Signs of scarcity are not confined to branded products, either, since both stores have noticeably thinned their usually burgeoning produce bins so that they are less cornucopian. The grocer told my wife that this greatly reduces waste, and that every penny counts because profit margins in the produce aisle are so thin. Read The Rest of The Article | Comments ***

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